Platforms are not a new idea. Over a hundred years ago Messrs Sears and Roebuck pioneered a business to enable remote shopping, using their catalogue to bring ever more exotic goods to the doorsteps of the most far-flung farm or homestead across the United States. But theirs wasn’t a single component innovation; to make it work they needed to build an ecosystem. Selling was only a part of the story; realising their value proposition depended on paying attention to a host of other elements, things like capturing and processing orders, procuring stock, storage and distribution, handling logistics over a large area and managing the cash flows so that they had the money upfront in order to fund the whole operation. It was like a giant jigsaw puzzle and it took them a couple of years before they managed to wrestle the right pieces into place.
Above all they were smart enough to recognise that they didn’t need to own or control everything as long as they could orchestrate and co-ordinate it. They partnered with a host of players like domestic appliance makers, finance houses, and shipping companies to create a win-win model in which everyone was able to take a share in the rapidly growing market. From dolls to power tools, bicycles to fur coats, seeds to automobiles the model linked millions of people in a market square the size of a continent. And it was a platform on which innovation flourished; once the basic model was established it became a breeding ground for new goods and services, new ways of creating and providing value.
The difficulty in those days lay in the mechanics; building such a platform on the back of a largely analogue system wasn’t easy. Finding customers spread out across the sprawling plains and along the coasts and then serving them with what they needed stretched the limits of the US postal system and the many other players who had to deal not just with a ‘last mile’ problem but with the thousands of miles in between.
Today’s digital context changes that. Now we can have both richness and reach in terms of the range and quality of services and their availability to anyone. Network effects act as multipliers, not constraints. Platforms have emergent properties; the whole becomes greater than, rather than being limited by, the sum of the parts. As Annabel Gawer and colleagues show in their excellent book about platforms, the skill lies in creating open models and allowing for a loose form of governance rather than tight control.
We have plenty of examples to make the point. Once established today’s platform businesses can grow fast and innovate in many directions. Amazon is a typical case; less than thirty years ago it was an on-line bookseller; now it’s the dominant player in a global on-line version of the Sears and Roebuck model but it’s simultaneously a huge advertising business, an entertainment giant, a technology services player and a finance house.
It’s not alone; players like Yandex dominate the Russian-speaking world with their platform which grew, like Google, from a 1990s start-up in the field of search engines to offering food, internet shopping, transportation services and financial services. In China Jack Ma’s Alibaba operation built up from a business-to-business service (B2B) offering to become another giant, active in advertising, finance, entertainment and even on-line matchmaking, with an estimated user base close to one billion people.
Everywhere we look we can see platform models emerging. At its heart the idea is simple; establish a core model and then allow other players to interact across it, creating a living innovation system which feeds itself. eBay and Alibaba’s Taobao enable consumer to consumer offerings, Apple and Android connect developers with users, Wordpress and Wix enable hundreds of thousands of websites and communities. Collaborative innovation across shared platforms is becoming big business, accelerating models of networked development for companies like Fujitsu, Airbus and Nokia.
Amongst all of this interest and activity it’s worth looking at the potential platforms might have for social innovation. Can we create an ecosystem to help enable better linkage between social needs and means, one which allows the development of innovations across it?
Take the case of M-PESA. Originally a development aid project created in Kenya in 2007 as a result of collaboration between Vodafone and its subsidiary Safaricom working with the UK’s Department for International Development it offered a mobile phone- based money transfer service. Its popularity and technical sophistication grew and it became not only an alternative banking and financial system for anyone with access to a phone but the basis for cashless transactions in goods and services. By 2010 it was the most successful mobile-phone based financial service in the developing world, effectively providing banking and financial support to the vast number of people normally excluded from that system. Currently close to half of Kenya’s GDP passes across the platform while versions of it can be found in 96 countries around the world. The industry body GSMA estimates that there are now over 1.2 billion accounts with transaction levels running at over $2bn per day. Its impact in other fields, like humanitarian aid, has been radical, changing the face of the way aid is distributed through agencies like the World Food Programme which now offers the bulk of its famine support via mobile finance.